Question 4.8: From the trial balance of Retepmal Ltd at 31 March 2010 show...
From the trial balance of Retepmal Ltd at 31 March 2010 shown below prepare an income statement for the year to 31 March 2010 and a balance sheet as at 31 March 2010 using the formats used by most UK companies.
| £ | |
| Premises (net book value) | 95,000 |
| Accounts receivable | 75,000 |
| Purchases of inventories | 150,000 |
| Retained earnings at 31 March 2009 | 130,000 |
| Inventories at 31 March 2009 | 15,000 |
| Furniture and fixtures | 30,000 |
| Sales revenue | 266,000 |
| Distribution costs | 40,000 |
| Administrative expenses | 50,000 |
| Accounts payable | 54,000 |
| Motor vehicles (net book value) | 40,000 |
| Cash and bank | 35,000 |
| Equity share capital | 80,000 |
Additional information:
(a) Inventories at 31 March 2010 were £25,000.
(b) Dividend proposed for 2010 was £7,000.
(c) An accrual for distribution costs of £3,000 was required at 31 March 2010.
(d) A prepayment of administrative expenses of £5,000 was required at 31 March 2010.
(e) Corporation tax estimated to be payable on 2009/2010 profit was £19,000.
(f) Annual depreciation charges on premises and motor vehicles for the year to 31 March 2010 are included in administrative expenses and distribution costs, and in the cumulative depreciation provisions used to calculate the net book values of £95,000 and £40,000 respectively, shown in the trial balance at 31 March 2010.
The furniture and fixtures balance of £30,000 relates to purchases of assets during the year to 31 March 2010. The depreciation charge in administrative expenses and the corresponding depreciation provision are not included in the trial balance at 31 March 2010. They are required to be calculated on a straight line basis for a full year to 31 March 2010, based on a useful economic life of eight years and an estimated residual value of £6,000.
| £ | £ | |
| Revenue | 266,000 | |
| Cost of sales | ||
| Opening inventories 31 March 2009 | 15,000 | |
| plus Purchases | 150,000 | |
| less Closing inventories 31 March 2010 | \underline{(25,000)} | \underline{140,000} |
| Gross profit | 126,000 | |
| Distribution costs [40,000 + 3,000] | 43,000 | |
| Administrative expenses [50,000 − 5,000 + 3,000] | \underline{ 48,000} | |
| Profit before tax | 35,000 | |
| Income tax expense | \underline{ 19,000} | |
| Profit for the year | 16,000 | |
| Dividend | \underline{7,000} | |
| Retained earnings | \underline{9,000} |
| Balance sheet as at 31 March 2010 | |
| £ | |
| Non-current assets [95,000 + 40,000 + 30,000 − 3,000] | \underline{162,000} |
| Current assets | |
| Inventories | 25,000 |
| Trade receivables | 75,000 |
| Prepayments | 5,000 |
| Cash and cash equivalents | \underline{35,000} |
| Total current assets | \underline{140,000} |
| Total assets | \underline{302,000} |
| Current liabilities | |
| Trade payables | 54,000 |
| Accruals | 3,000 |
| Income tax payable | 19,000 |
| Dividends payable | \underline{7,000} |
| Total current liabilities | \underline{83,000} |
| Net assets | \underline{219,000} |
| Equity | |
| Share capital | 80,000 |
| Retained earnings [130,000 + 9,000] | \underline{139,000} |
| Total equity | \underline{219,000} |